QUESTIONS:

1. Prepare flexible OH budgets for October showing amounts of each variable and fixed cost at the 65%, 75% and 85% capacity levels. 2. Compute the direct maaterils variance, including its price and quantity variances.

The standard overhead rate ( $18.50 per direct labor hour) is based on the predicted activity level of 75% of the factory's capacity of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% capacity level. The company incurred the following actual costs when it operated at 75% of capacity in October. \begin{tabular}{|l|r|r|} \hline Direct materials (91,000 lbs @ $5.10 per lb) & & 464,100 \\ \hline Direct labor (30,500hrs@$17.25 per hr) & & 526,125 \\ \hline OH Costs & & \\ \hline Indirect materials & 44,250 & \\ \hline Indirect labor & 177,750 & \\ \hline Power & 43,000 & \\ \hline Maintenance & 96,000 & \\ \hline Depreciation - building & 24,000 & \\ \hline Depreciation - machinery & 75,000 & \\ \hline Taxes and insurance & 11,500 & \\ \hline Supervisory salaries & 89,000 & 560,500 \\ \hline \end{tabular}